Auspice Capital believes it has a solution to Alberta’s $10.3-billion deficit problem.
After international monitoring agency DBRS downgraded the government’s credit rating to AA on Wednesday, the firm said the province is relying too heavily on an oil price rebound.
“That’s behaving like a levered oil company with no risk management,” said CEO Tim Pickering.
He recommended Alberta work with Auspice Capital to create hedging revenues in the same way that Mexico did with its oil prices.
“They generated $6.8 billion in hedging revenues in 2015, $2.9 [billion] in 2016 and Mexico’s hedged $46 dollar WTI oil for 2018. So the question is, why wouldn’t we?” he asked.
Auspice Capital has forecasted WTI crude oil to hit $60 per barrel and $45 per barrel on the Canadian Crude Index. However, he said those figures shouldn’t solely dictate how the province manages its finances.
“I’m saying that’s a bet that’s too risky. You need to have a backstop, you need to have a backup plan in place,” said Pickering.
DBRS said further downgrades could come in the next year.
